Manufacturers Guide to Energy Procurement
And the cost of complacency
In late 2022, energy prices skyrocketed, shaking industries across the UK and beyond. For manufacturers, energy costs quickly became the most pressing issue, forcing businesses to make tough decisions to manage this unexpected overhead. Some implemented subtle changes, while others resorted to drastic measures. At the heart of the conversation was energy procurement, which became central to ensuring operational resilience.
However, not all manufacturers were prepared. Those with a robust energy procurement strategy weathered the storm better, while others were left exposed to the volatility of the energy market. Alarmingly, even today, many manufacturers lack a formal energy procurement strategy. With energy prices falling in 2024, there’s a growing concern that the hard lessons of 2022 are being forgotten, leaving businesses vulnerable to the next potential energy crisis.
The crisis in context
The energy crisis didn’t emerge in isolation. It reflected years of rising vulnerabilities in global and domestic energy markets. Geopolitical tensions, particularly the war in Ukraine, underscored Europe’s heavy reliance on natural gas imports. For the UK, this dependence on foreign energy was compounded by:
Rising costs to meet environmental obligations.
Underinvestment in renewable infrastructure.
The lack of a diversified energy mix to offset price shocks.
Smaller manufacturers were hit hardest. Without dedicated procurement teams or flexible purchasing options, many were locked into high-cost, fixed-price contracts signed during price peaks. In contrast, larger firms, with established strategies or economies of scale, were better positioned to navigate the crisis, further widening the competitive gap.
Energy procurement: a strategic imperative
The volatility of energy markets revealed just how interconnected energy procurement is with broader economic trends. It wasn’t just about energy costs—manufacturers also faced rising inflation, supply chain disruptions, and wage pressures. Amid these challenges, the ability to forecast energy expenditures and secure competitive pricing became a strategic necessity, rather than a financial bonus.
Governments across Europe scrambled to support their industries with varying degrees of success. While some have advocated for a shift to renewable energy to reduce exposure to global price fluctuation, progress has been slow:
Grid upgrades remain sluggish.
Renewable energy projects face long lead times.
Successive governments have lacked consistent industrial energy policies.
For now, manufacturers must adopt an "eyes-wide-open" approach to energy procurement. Operational resilience in energy remains almost entirely in their hands.
Lessons learned—or forgotten?
The crisis underscored the importance of robust energy procurement strategies as a cornerstone of operational resilience. However, as prices began to fall in 2024, early signs of complacency emerged. Some manufacturers appear to be stepping back from the diligent procurement practices adopted during the crisis.
According to recent research:
20% of manufacturers still lack an energy procurement strategy.
33% have yet to revise their strategies post-2022.
This raises a critical question: Have manufacturers truly learned from the crisis, or are they at risk of repeating past mistakes?
Future-proofing with Make UK and Inspired
To help manufacturers navigate these challenges, Make UK, in partnership with Inspired, has published Energy Procurement: The Cost of Complacency. This report offers insights into:
The steps firms can take to establish or improve their energy procurement strategies.
Case studies showcasing how strategic procurement can shield businesses from market volatility.
Practical guidance on aligning energy strategies with broader business goals.
The report emphasizes that energy procurement is no longer a "nice-to-have" but a business-critical function. By adopting proactive strategies, manufacturers can mitigate risks, control costs, and position themselves for long-term success.
For a free copy of the report visit our website here